EXHIBIT 99.23(p)
CODE OF ETHICS
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POTOMAC FUNDS
POTOMAC INSURANCE TRUST
and
RAFFERTY ASSET MANAGEMENT, LLC
I. INTRODUCTION
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A. FIDUCIARY DUTY. This Code of Ethics has been adopted by the above
named trusts ("Trusts") and Rafferty Asset Management, LLC in compliance with
Rule 17j-1 under the Investment Company Act of 1940, as amended. Capitalized
terms used in this Code are defined in Appendix 1 to this Code. All Appendices
referred to herein are attached to and are a part of this Code.
This Code is based on the principle that the trustees, officers, and
employees of Rafferty and the Trusts have a fiduciary duty to place the
interests of the Funds ahead of their own interests. The Code applies to all
Access Persons and focuses principally on preclearance and reporting of personal
transactions in securities. Access Persons must avoid activities, interests and
relationships that might interfere with making decisions in the best interests
of the Funds.
As fiduciaries, Access Persons must at all times:
1. PLACE THE INTERESTS OF THE FUNDS FIRST. Access Persons must
scrupulously avoid serving their own personal interests ahead of the
interests of the Funds. An Access Person may not induce or cause a Fund
to take action, or not to take action, for personal benefit, rather
than for the benefit of the Fund. For example, an Access Person would
violate this Code by causing a Fund to purchase a Security he or she
owned for the purpose of increasing the price of that Security.
2. AVOID TAKING INAPPROPRIATE ADVANTAGE OF THEIR POSITIONS.
Access Persons may not, for example, use their knowledge of portfolio
transactions to profit by the market effect of such transactions.
Receipt of investment opportunities, prerequisites, or gifts from
persons seeking business with the Trusts or Rafferty could call into
question the exercise of an Access Person's independent judgment.
3. CONDUCT ALL PERSONAL SECURITIES TRANSACTIONS IN FULL
COMPLIANCE WITH THIS CODE INCLUDING THE REPORTING REQUIREMENTS.
Doubtful situations should be resolved in favor of the Funds. Technical
compliance with the Code's procedures will not automatically insulate
from scrutiny any trades that indicate an abuse of fiduciary duties.
B. APPENDICES TO THE CODE. The appendices to this Code are attached to
and are a part of the Code. The appendices include the following:
1. DEFINITIONS (Appendix 1),
2. CONTACT PERSONS (Appendix 2),
3. CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS (Appendix 3 and
3-I),
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a) PERSONAL SECURITIES HOLDINGS AND ACCOUNTS DISCLOSURE FORM
(Appendix 3-A)
4. FORM LETTER TO BROKER, DEALER OR BANK (Appendix 4).
5. REPORT OF SECURITIES TRANSACTIONS (Appendix 5)
6. INITIAL PUBLIC OFFERING/PRIVATE PLACEMENT CLEARANCE FORM
(Appendix 6)
C. Application of the Code to Independent Fund Trustees.
Notwithstanding the definition of Access Persons, the following provisions do
not apply to Independent Fund Trustees and their Immediate Families.
1. Personal Securities Transactions (Section II)
2. Initial, Quaterly and Annual Holdings Reporting Requirements
(Section III.A.)
3. Receipt and Giving of Gifts (Section IV.B.)
4. Restrictions on Service as a Director of a Publicly-Traded Company
(Section IV.E.)
II. PERSONAL SECURITIES TRANSACTIONS
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A. PROHIBITED TRANSACTIONS.
1. PROHIBITED SECURITIES TRANSACTIONS. The following Securities
Transactions are prohibited and will not be authorized by the
Compliance Officer (or a designee) absent exceptional circumstances.
The prohibitions apply only to the categories of Access Persons
specified.
a. INITIAL PUBLIC OFFERINGS (INVESTMENT PERSONNEL
ONLY). Any purchase of Securities by Investment Personnel in
an initial public offering (other than a new offering of a
registered open-end investment company). However, if
authorized, the Compliance Officer will maintain a record of
the reasons for such authorization (see Appendix 6).
b. PENDING BUY OR SELL ORDERS (INVESTMENT PERSONNEL
ONLY). Any purchase or sale of Securities by Investment
Personnel on any day during which any Fund has a pending "buy"
or "sell" order in the same Security (or Equivalent Security)
until that order is executed or withdrawn.
c. SEVEN-DAY BLACKOUT (INVESTMENT PERSONNEL ONLY).
Purchases or sales of Securities by Investment Personnel
within seven calendar days of a purchase or sale of the same
Securities (or Equivalent Securities) by the Funds. For
example, if a Fund trades a Security on day one, day eight is
the first day the Investment Personnel may trade that Security
for an account in which he or she has a beneficial interest.
d. INTENTION TO BUY OR SELL FOR A FUND (ALL ACCESS
PERSONS). Purchases or sales of Securities by an Access Person
at a time when that Access Person intends, or knows of
another's intention, to purchase or sell that Security (or an
Equivalent Security) on behalf of a Fund. This prohibition
applies whether the Securities Transaction is in the same
direction (e.g., two purchases) or the opposite direction (a
purchase and sale) as the transaction of the Fund.
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2. ALWAYS PROHIBITED SECURITIES TRANSACTIONS. The following
Securities Transactions are prohibited and will not be authorized under
any circumstances.
a. INSIDE INFORMATION. Any transaction in a Security
while in possession of material nonpublic information
regarding the Security or the issuer of the Security.
b. MARKET MANIPULATION. Transactions intended to
raise, lower, or maintain the price of any Security or to
create a false appearance of active trading.
c. OTHERS. Any other transactions deemed by the
Compliance Officer (or a designee) to involve a conflict of
interest, possible diversions of a corporate opportunity, or
an appearance of impropriety.
3. PRIVATE PLACEMENTS (INVESTMENT PERSONNEL ONLY). Acquisition
of Beneficial Interests in Securities in a private placement by
Investment Personnel is strongly discouraged. The Compliance Officer
(or a designee) will give permission only after considering, among
other facts, whether the investment opportunity should be reserved for
a Fund and whether the opportunity is being offered to the person by
virtue of the person's position as an Investment Person. If a private
placement transaction is permitted, the Compliance Officer will
maintain a record of the reasons for such approval (see Appendix 6).
Investment Personnel who have acquired securities in a private
placement are required to disclose that investment to the Compliance
Officer when they play a part in any subsequent consideration of an
investment in the issuer by a Fund, and the decision to purchase
securities of the issuer by a Fund must be independently authorized by
a Portfolio Manager with no personal interest in the issuer.
B. Exemptions.
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1. The following Securities Transactions are exempt from
the restrictions set forth in Section II.A.
a. MUTUAL FUNDS. Securities issued by any registered
open-end investment companies (including the Funds);
b. NO KNOWLEDGE. Securities Transactions where neither
the Access Person nor an Immediate Family member knows of the
transaction before it is completed (for example, Securities
Transactions effected for an Access Person by a trustee of a
blind trust or discretionary trades involving an investment
partnership or investment club in which the Access Person is
neither consulted nor advised of the trade before it is
executed);
c. CERTAIN CORPORATE ACTIONS. Any acquisition of
Securities through stock dividends, dividend reinvestments,
stock splits, reverse stock splits, mergers, consolidations,
spin-offs, or other similar corporate reorganizations or
distributions generally applicable to all holders of the same
class of Securities;
d. RIGHTS. Any acquisition of Securities through the
exercise of rights issued by an issuer pro rata to all holders
of a class of its Securities, to the extent the rights were
acquired in the issue; and
e. MISCELLANEOUS. Any transaction in the following: (1)
bankers' acceptances, (2) bank certificates of deposit, (3)
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commercial paper, (4) high quality short-term debt, including
repurchase agreements, (5) Securities that are direct
obligations of the U.S. Government, and (6) other Securities
as may from time to time be designated in writing by the
Compliance Officer on the grounds that the risk of abuse is
minimal or non-existent.
2. Personal Transactions in Securities that also are being
purchased, sold or held by a Fund are exempt from the prohibitions of
Sections II.A.1.b, and c, if the Access Person does not, in connection
with his or her regular functions or duties, make, participate in, or
obtain information regarding the purchase or sale of Securities by that
Fund.
THE SECURITIES TRANSACTIONS LISTED IN SECTION II IN THIS
SUBSECTION ARE NOT EXEMPT FROM THE REPORTING REQUIREMENTS OF THE CODE.
3. APPLICATION TO COMMODITIES, FUTURES, OPTIONS ON FUTURES AND
OPTIONS ON BROAD-BASED INDICES. Commodities, futures (including
currency futures and futures on securities comprising part of a
broad-based, publicly traded market based index of stocks) and options
on futures are not subject to the seven-day blackout and prohibited
transaction provisions of Section II.A., but are subject to transaction
reporting.
III. REPORTING REQUIREMENTS
A. REPORTING REQUIREMENTS FOR ALL ACCESS PERSONS EXCEPT INDEPENDENT
FUND TRUSTEES
1. INITIAL HOLDINGS AND ACCOUNTS REPORT. Any person who
becomes an Access Person of Rafferty or the Funds must submit within 10
days of becoming an Access Person an Initial Holdings and Accounts
Report (see Appendix 3-A) to the Compliance Officer listing all
Securities accounts and securities that he or she holds in such
accounts in which that Access Person (or Immediate Family member) has
Beneficial Interest..
2. QUARTERLY REPORTING REQUIREMENTS. Every Access Person and
members of his or her Immediate Family must arrange for the Compliance
Officer to receive directly from any broker, dealer, or bank that
effects any Securities Transaction, duplicate copies of each
confirmation for each such transaction and periodic statements for each
brokerage account in which such Access Person has a Beneficial
Interest. Attached hereto as Appendix 4 is a form of letter that may be
used to request such documents from such entities. All copies must be
received no later than 10 days after the end of the calendar quarter.
Each confirmation or statement must disclose the following information:
a) the date of the transaction;
b) the title (and interest rate and maturity date, if
applicable)
c) the number of shares and principal amount
d) the nature of the transaction (e.g., purchase, sale);
e) the price of the Security; and
f) the name of the broker, dealer or bank through which the
trade was effected.
If an Access Person is not able to arrange for duplicate
confirmations and periodic statements to be sent that contain the
information required above, the Access Person must submit a Quarterly
Transaction Report (see Appendix 5) within 10 days after the completion
of each calendar quarter to the Compliance Officer.
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3. Every Access Person who establishes a Securities account
during the quarter in which that Access Person (or Immediate Family
member) has Beneficial Interest must submit an Account Report (see
Appendix 5) to the Compliance Officer. This report must be submitted to
the Compliance Officer within 10 days after the completion of each
calendar quarter.
4. ANNUAL HOLDINGS AND ACCOUNTS REPORT. Every Access Person
must submit an Annual Holdings and Accounts Report (see Appendix 3-A)
listing all Securities accounts and securities in which that Access
Person (or Immediate Family member) has Beneficial Interest. The
information in the Annual Holdings Report must be current as of a date
no more than 30 days before the report is submitted. The completed
report should be submitted to the Compliance Officer by December 31
following the end of the calendar year.
B. REPORTING REQUIREMENTS FOR INDEPENDENT FUND TRUSTEES
Each Independent Fund Trustee (and their Immediate Families)
must report to the Compliance Officer any trade in a Security by any
account in which the Independent Fund Trustee has any Beneficial
Interest if the Independent Fund Trustee knew or, in the ordinary
course of fulfilling his or her duty as a Trustee of the Trusts, should
have known that during the 15-day period immediately preceding or after
the date of the transaction in a Security by the Trustee such Security
(or an Equivalent Security) was or would be purchased or sold by the
Fund or such purchase or sale by the Fund was or would be considered by
the Fund or by Rafferty for the Fund. Independent Fund Trustees who
need to report such transactions should refer to the procedures
outlined in Section III.A.2.
C. EXEMPTIONS, DISCLAIMERS AND AVAILABILITY OF REPORTS
1. A Securities Transaction involving the following
circumstances or Securities are exempt from the Reporting Requirements
discussed above: (1) neither the Access Person nor an Immediate Family
Member had any direct or indirect influence or control over the
transaction; (2) Securities directly issued by the U.S. Government; (3)
bankers' acceptances; (4) bank certificates of deposit; (5) commercial
paper; (6) high quality short-term debt instruments, including
repurchase agreements; (7) shares issued by open-end mutual funds; and
(7) other Securities as may from time to time be designated in writing
by the Compliance Officer on the grounds that the risk of abuse is
minimal or non-existent.
In addition, no Access Person of Rafferty shall be required to
make a Quarterly Transaction Report where such report would duplicate
information recorded by Heritage pursuant to Rule 204-2(a) of the
Investment Advisers Act of 1940.
2. DISCLAIMERS. Any report of a Securities Transaction for the
benefit of a person other than the individual in whose account the
transaction is placed may contain a statement that the report should
not be construed as an admission by the person making the report that
he or she has any direct or indirect beneficial ownership in the
Security to which the report relates.
3. AVAILABILITY OF REPORTS. All information supplied pursuant
to this Code may be made available for inspection to the Board of
Trustees of the Trusts, the Board of Directors of Rafferty, the
Compliance Officer, any party to which any investigation is referred by
any of the foregoing, the SEC, any self-regulatory organization of
which Rafferty is a member, any state securities commission, and any
attorney or agent of the foregoing or of the Trusts.
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IV. FIDUCIARY DUTIES
A. CONFIDENTIALITY. Access Persons are prohibited from revealing
information relating to the investment intentions, activities or portfolios of
the Funds except to persons whose responsibilities require knowledge of the
information.
B. GIFTS. The following provisions on gifts apply to all Investment
Personnel.
1. Accepting Gifts. On occasion, because of their position
with the Trusts, Investment Personnel may be offered, or may receive
without notice, gifts from clients, brokers, vendors, or other persons
not affiliated with such entities. Acceptance of extraordinary or
extravagant gifts is not permissible. Any such gifts must be declined
or returned in order to protect the reputation and integrity of the
Trusts and Rafferty. Gifts of a nominal value (i.e., gifts whose
reasonable value is no more than $100 a year), and customary business
meals, entertainment (e.g., sporting events), and promotional items
(e.g., pens, mugs, T-shirts) may be accepted.
If an Investment Person receives any gift that might be
prohibited under this Code, the Investment Person must inform the
Compliance Officer.
2. SOLICITATION OF GIFTS. Investment Personnel may not
solicit gifts or gratuities.
3. GIVING GIFTS. Investment Personnel may not personally
give any gift with a value in excess of $100 per year to persons
associated with securities or financial organizations, including
exchanges, other member organizations, commodity firms, news media, or
clients of Rafferty.
C. CORPORATE OPPORTUNITIES. Access Persons may not take personal
advantage of any opportunity properly belonging to the Trusts or Rafferty. This
includes, but is not limited to, acquiring Securities for one's own account that
would otherwise be acquired for a Fund.
D. UNDUE INFLUENCE. Access Persons may not cause or attempt to cause
any Fund to purchase, sell or hold any Security in a manner calculated to create
any personal benefit to the Access Person. If an Access Person or Immediate
Family member stands to benefit materially from an investment decision for a
Fund which the Access Person is recommending or participating in, the Access
Person must disclose to those persons with authority to make investment
decisions for the Fund (or, if the Access Person in question is a person with
authority to make investment decisions for the Fund, to the Compliance Officer)
any Beneficial Interest that the Access Person (or Immediate Family member) has
in that Security or an Equivalent Security, or in the issuer thereof, where the
decision could create a material benefit to the Access Person (or Immediate
Family member) or the appearance of impropriety. The person to whom the Access
Person reports the interest, in consultation with the Compliance Officer, must
determine whether or not the Access Person will be restricted in making
investment decisions.
E. SERVICE AS A DIRECTOR. No Investment Person may serve on the board
of directors of a publicly-held company (other than the Trusts) absent prior
written authorization by the Compliance Officer. This authorization will rarely,
if ever, be granted and, if granted, normally will require that the affected
Investment Person be isolated, through a "Chinese Wall" or other procedures,
from those making investment decisions related to the issuer on whose board the
person sits.
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V. COMPLIANCE WITH THIS CODE OF ETHICS
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A. COMPLIANCE OFFICER REVIEW
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1. Investigating Violations of the Code. The Compliance
Officer is responsible for investigating any suspected violation of the
Code and shall report the results of each investigation to the
President of Rafferty. The President of Rafferty together with the
Compliance Officer are responsible for reviewing the results of any
investigation of any reported or suspected violation of the Code. Any
violation of the Code by an Access Person will be reported to the
Boards of Trustees of the Trusts no less frequently than each regular
quarterly meeting.
2. Annual Reports. The Compliance Officer will review the
Code at least once a year, in light of legal and business developments
and experience in implementing the Code, and will report to the Boards
of Trustees of the Trusts:
a. Summarizing existing procedures concerning personal
investing and any changes in the procedures made during the
past year;
b. Identifying any violation requiring significant
remedial action during the past year; and
c. Identifying any recommended changes in existing
restrictions or procedures based on its experience under the
Code, evolving industry practices, or developments in
applicable laws or regulations.
B. REMEDIES
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1. SANCTIONS. If the Compliance Officer and the President of
Rafferty determine that an Access Person has committed a violation of
the Code following a report of the Compliance Officer, the Compliance
Officer and the President of Rafferty may impose sanctions and take
other actions as they deem appropriate, including a letter of caution
or warning, suspension of personal trading rights, suspension of
employment (with or without compensation), fine, civil referral to the
SEC, criminal referral, and termination of the employment of the
violator for cause. The Compliance Officer and the President of
Rafferty also may require the Access Person to reverse the trade(s) in
question and forfeit any profit or absorb any loss derived therefrom.
The amount of profit shall be calculated by the Compliance Officer and
the President of Rafferty and shall be forwarded to a charitable
organization selected by the Compliance Officer and the President of
Rafferty. The Compliance Officer and the President of Rafferty may not
review his or her own transaction.
2. SOLE AUTHORITY. The Compliance Officer and the President of
Rafferty have sole authority, subject to the review set forth in
Section V.B.3 below, to determine the remedy for any violation of the
Code, including appropriate disposition of any monies forfeited
pursuant to this provision. Failure to promptly abide by a directive to
reverse a trade or forfeit profits may result in the imposition of
additional sanctions.
3. REVIEW. Whenever the Compliance Officer and the President
of Rafferty determine that an Access Person has committed a violation
of this Code that merits remedial action, they will report no less
frequently than quarterly to the Boards of Trustees of the Trusts,
information relating to the investigation of the violation, including
any sanctions imposed. The Boards of Trustees of the Trusts may modify
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such sanctions as it deems appropriate. The Boards of Trustees of the
Trusts and the Compliance Officer and the President of Rafferty shall
have access to all information considered by the Compliance Officer in
relation to the case. The Compliance Officer may determine whether or
not to delay the imposition of any sanctions pending review by the
applicable Board.
C. EXCEPTIONS TO THE CODE. Although exceptions to the Code will rarely,
if ever, be granted, the Compliance Officer may grant exceptions to the
requirements of the Code on a case by case basis if the Compliance Officer finds
that the proposed conduct involves negligible opportunity for abuse. All such
exceptions must be in writing and must be reported as soon as practicable to the
Boards of Trustees of the Trusts at its next regularly scheduled meeting after
the exception is granted.
D. COMPLIANCE CERTIFICATION. Each current Access Person and each
newly-hired Access Person shall certify that he or she has received, read and
understands the Code by executing the Certification of Compliance with the Code
of Ethics form (see Appendix 3). In addition, by December 31 following the end
of the prior calendar year, all Access Persons will be required to re-certify on
such form (see Appendix 3) that they have read and understand the Code, that
they have complied with the requirements of the Code, and that they have
reported all Securities Transactions required to be disclosed or reported
pursuant to the requirements of this Code. Independent Fund Trustees should
complete Appendix 3-I only.
E. Inquiries Regarding the Code. The Compliance Officer will answer any
questions about the Code or any other compliance-related matters.
August 26, 1997, as amended February 24, 2000
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Appendix 1
DEFINITIONS
"ACCESS PERSON" means any trustee, director, officer or Advisory Person
of Rafferty or the Trusts.
"ADVISORY PERSON" means (1) any employee of Rafferty and the Trusts (or
of any company in a control relationship with such companies) who, in connection
with his or her regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security by the Funds, or whose
functions relate to the making of any recommendation with respect to such
purchases or sales, and (2) any natural person in a control relationship to such
companies who obtains information concerning the recommendations made to the
Funds with respect to the purchase and sale of securities by the Funds.
"BENEFICIAL INTEREST" means the opportunity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, to
profit, or share in any profit derived from, a transaction in the subject
Securities. An Access Person is deemed to have a Beneficial Interest in
Securities owned by members of his or her Immediate Family. Common examples of
Beneficial Interest include joint accounts, spousal accounts, UTMA accounts,
partnerships, trusts and controlling interests in corporations. Any uncertainty
as to whether an Access Person has a Beneficial Interest in a Security should be
brought to the attention of the Compliance Officer. Such questions will be
resolved in accordance with, and this definition shall be subject to, the
definition of "beneficial owner" found in Rules 16a-1(a)(2) and (5) promulgated
under the Securities Exchange Act of 1934.
"CODE" means this Code of Ethics, as it may be amended from time to
time.
"COMPLIANCE OFFICER" means the Compliance Officer of Rafferty and the
persons designated in Appendix 2, as such Appendix shall be amended from time to
time.
"EQUIVALENT SECURITY" means any Security issued by the same entity as
the issuer of a subject Security, including options, rights, stock appreciation
rights, warrants, preferred stock, restricted stock, phantom stock, bonds, and
other obligations of that company or security otherwise convertible into that
security. Options on securities are included even if, technically, they are
issued by the Options Clearing Corporation or a similar entity.
"FUND" and "FUNDS" mean one or more of the portfolios of the Potomac
Funds, an investment company registered under the 1940 Act for which Rafferty
serves as investment adviser.
"IMMEDIATE FAMILY" of an Access Person means any of the following
persons who reside in the same household as the Access Person:
child grandparent son-in-law
stepchild spouse daughter-in-law
grandchild sibling brother-in-law
parent mother-in-law sister-in-law
stepparent father-in-law
Immediate Family includes adoptive relationships and any other relationship
(whether or not recognized by law) which the Compliance Officer determines could
lead to the possible conflicts of interest, diversions of corporate opportunity,
or appearances of impropriety which this Code is intended to prevent.
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"INDEPENDENT FUND TRUSTEE" means a trustee of a Trust who is not an
"interested person" as that term is defined in Section 2(a)(19) of the 1940 Act.
"INITIAL PUBLIC OFFERING" is an offering of securities registered under
the Securities Act of 1933 by an issuer who immediately before the registration
of such securities was not subject to the reporting requirements of sections 13
or 15(d) of the Securities Exchange Act of 1934.
"INVESTMENT PERSONNEL" and "Investment Person" mean (1) employees of
Rafferty or the Trusts (or of any company in a control relationship to such
companies) who, in connection with his or her regular functions or duties, makes
or participates in making recommendations regarding the purchase or sale of a
security, or (2) any natural person who controls Rafferty or the Trusts and who
obtains information concerning recommendations made to the Funds regarding the
purchase and sale of securities by the Funds. References to Investment Personnel
include Portfolio Managers.
"1940 ACT" means the Investment Company Act of 1940, as amended.
"PRIVATE PLACEMENT" means a limited offering exempt from registration
pursuant to Rules 504, 505 or 506 or under Section 4(2) or 4(6) of the
Securities Act of 1933.
"PORTFOLIO MANAGER" means a person who has or shares principal
day-to-day responsibility for managing the portfolio of a Fund.
"Rafferty" means Rafferty Asset Management, LLC.
"SEC" means the Securities and Exchange Commission.
"SECURITY" includes stock, notes, bonds, debentures, and other
evidences of indebtedness (including loan participations and assignments),
limited partnership interests, investment contracts, and all derivative
instruments of the foregoing, such as options and warrants. "Security" does not
include futures and options on futures, but the purchase and sale of such
instruments are nevertheless subject to the reporting requirements of the Code.
"SECURITIES TRANSACTION" means a purchase or sale of Securities in
which an Access Person or a member of his or her Immediate Family has or
acquires a Beneficial Interest.
"TRUSTS" means the Potomac Funds and the Potomac Insurance Trust, each
an investment company registered under the 1940 Act.
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Appendix 2
CONTACT PERSONS
COMPLIANCE OFFICER
1. Stephen P. Sprague
2. Thomas A. Mulrooney
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Appendix 3
CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS
I acknowledge that I have received the Code of Ethics dated August 26,
1997, as amended on February 24, 2000, and certify that:
1. I have read the Code of Ethics and I understand that it
applies to me and to all accounts in which I or a member of my
Immediate Family has any Beneficial Interest.
2. In accordance with Section III.A. of the Code of Ethics, I
will report or have reported all Securities Transactions in which I
have, or a member of my Immediate Family has, a Beneficial Interest,
except for transactions exempt from reporting under Section III.C.
3. I have listed on Appendix 3-A of this form all accounts and
securities in which I have, or any member of my Immediate Family has,
any Beneficial Interest.
4. I will comply or have complied with the Code of Ethics in
all other respects.
5. I agree to disgorge and forfeit any profits on
prohibited transactions in accordance with the requirements
of the Code of Ethics.
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Access Person's Signature
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Print Name
Date:____________________
SEE NEXT PAGE
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Appendix 3-A
PERSONAL SECURITIES HOLDINGS and ACCOUNTS DISCLOSURE FORM
(for use as an Initial or Annual Holdings and Accounts Report)
Pursuant to Section III.A.1 or III.A.3 of the Code of Ethics, please
list all Securities accounts and Securities holdings for each Securities account
in which you or your Immediate Family member has beneficial interest. You do not
need to list those Securities that are exempt pursuant to Section III.C.
Is this an Initial or Annual Report? _________________
Name of Access Person: ____________________________
Name of Account Holder: ____________________________
Relationship to Access Person: ____________________________
SECURITIES HOLDINGS:
Attach to this Report your most recent account statement and/or list Securities
held below:
Name of Security Quantity Principal Amount Name of Broker/Dealer/Bank
---------------- -------- ---------------- --------------------------
1.
2.
3.
4.
5.
(Attach separate sheets as necessary)
SECURITIES ACCOUNTS:
Account Name Account Number Date Account Opened Name of Broker/Dealer/Bank
------------ -------------- ------------------- --------------------------
1.
2.
3.
4.
(Attach separate sheets as necessary)
I certify that this Report and the attached statements (if any)
constitute all the Securities accounts and Securities that must be reported
pursuant to this Code.
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Access Person Signature
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Print Name Date
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Appendix 3-I
CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS
(Independent Fund Trustees)
I acknowledge that I have received the Code of Ethics dated August 26,
1997, as amended on February 24, 2000, and certify that:
1. I have read the Code of Ethics and I understand that it
applies to me and to all accounts in which I or a member of my
Immediate Family has any Beneficial Interest.
2. I will report or have reported all Securities Transactions
required to be reported under Section III.B. of the Code in which I
have, or a member of my Immediate Family has, a Beneficial Interest.
3. I will comply or have complied with applicable provisions
of the Code of Ethics in all other respects.
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Trustee's Signature
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Print Name
Date:__________________
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Appendix 4
Form of Letter to Broker, Dealer or Bank
[Date]
[Broker Name and Address]
Subject: Account # _________________
Dear ________________:
Rafferty Asset Management, LLC ("Rafferty"), my employer, is a
registered investment adviser. In connection with the Code of Ethics adopted by
Rafferty, I am required to request that you send duplicate confirmations of
individual transactions as well as duplicate periodic statements for the
referenced account to my employer. Please note that the confirmations and/or
periodic statements must disclose the following information:
1) date of the transaction;
2) the title of the security (including interest rate and maturity date)
and price;
3) the number of shares and principal amount;
4) the nature of the transaction (e.g., purchase or sale); and
5) the name of the firm effecting the trade.
If you are unable to provide this information, please let me know immediately.
Otherwise, please address the confirmations and statements directly to:
Mr. Steve Sprague
Rafferty Asset Management, LLC
1311 Mamaroneck Avenue
White Plains, New York 10605.
Your cooperation is most appreciated. If you have any questions
regarding these requests, please contact me at (phone number) or Mr. Sprague at
(914) 381-2838.
Sincerely,
[Name of Access Person]
<PAGE>
Appendix 5
REPORT OF SECURITY TRANSACTIONS
FOR QUARTER ENDED______________________
ACCESS PERSONS OTHER THAN INDEPENDENT FUND TRUSTEES: You do not need to report
transactions in 1) direct obligations of the U.S. Government, 2) bankers'
acceptances, bank CDs, commercial paper, high quality short-term debt
instruments, 3) shares of an open-end investment company, and 4) transactions
which you had no direct or indirect influence or control.
INDEPENDENT FUND TRUSTEES: If you are an Independent Fund Trustee, then you only
need to report a transaction if you, at the time of that transaction, knew or,
in the ordinary course of fulfilling your official duties as a Trustee to the
Potomac Funds, should have known that, during the 15-day period immediately
before or after your transaction in a security,
1) the Funds purchased or sold such security or
2) the Funds or their investment adviser considered purchasing or
selling such security.
Disclose all securities transactions for the period covered by this Report:
<TABLE>
<CAPTION>
----------------------------- ------------- ---------------- -------------- -------------- ------------- ---------------------------
Price at
Name/Description of Number Date of Which Principal Bought Name of
Security* Shares Transaction Effected Amount or Sold Broker/Dealer/Bank
----------------------------- ------------- ---------------- -------------- -------------- ------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
----------------------------- ------------- ---------------- -------------- -------------- ------------- ---------------------------
----------------------------- ------------- ---------------- -------------- -------------- ------------- ---------------------------
----------------------------- ------------- ---------------- -------------- -------------- ------------- ---------------------------
----------------------------- ------------- ---------------- -------------- -------------- ------------- ---------------------------
----------------------------- ------------- ---------------- -------------- -------------- ------------- ---------------------------
----------------------------- ------------- ---------------- -------------- -------------- ------------- ---------------------------
----------------------------- ------------- ---------------- -------------- -------------- ------------- ---------------------------
----------------------------- ------------- ---------------- -------------- -------------- ------------- ---------------------------
</TABLE>
* Please disclose the interest rate or maturity date, if applicable.
Did you establish any securities accounts during the period covered by this
Report? ___ Yes ___ No
If Yes, please complete the following:
<PAGE>
--------------------------------------------------------------------------------
Date of
Name of Broker Account Opening Account Number
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
____ The above is a record of every transaction in a security or account
opened which I had, or in which I acquired, any direct or indirect
beneficial ownership during the period indicated above.
____ I certify that the Compliance Officer has received confirmations or
account statements pertaining to all transactions executed and that
disclose the information required above, and notice of any accounts
opened, during the period covered by this Report.
____ I have nothing to report for the period covered by this Report.
Date: Signature:
--------------------------- -----------------------
2
<PAGE>
Appendix 6
INITIAL PUBLIC OFFERING/PRIVATE PLACEMENT
CLEARANCE FORM
(for the use of the Compliance Officer only)
The Code of Ethics for Rafferty and the Potomac Funds prohibits any
acquisition of securities in an initial public offering (other than shares of
open-end investment companies) and private placement by any Investment Person.
In cases of exceptional circumstances, however, investments in such securities
may be permitted. In these instances, a record of the rationale supporting the
approval of such transactions must be completed and retained for a period of 5
years after the end of the fiscal year in which approval is granted. This form
should be used for such record keeping purposes.
Name of Investment Person: _________________________________
Date of Request: _________________________________
Name of IPO / Private Placement: _________________________________
Date of Offering: _________________________________
Number of Shares/Interests _________________________________
Price: _________________________________
Name of Broker/Dealer/Bank _________________________________
___ I have cleared the IPO / Private Placement transaction described above.
Reasons supporting the decision to approve the above transaction:
------------------------------------
Name of Compliance Officer
------------------------------------
Signature of Compliance Officer
------------------------------------
Date
